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American Capital Agency Corp. Message Board

  • pc4me58 pc4me58 Mar 21, 2013 1:15 PM Flag

    I am asking this question here for 2 reason

    First because it relates to AGNC and second because the board on ANH is dead. AGNC has long been my favorite in the sector. I also own some ANH. Why? I suppose because I'm lazy. So I noticed that the yield (assuming div stays unch) on ANH is roughly 9.60% and the yield on the preferred is 8.2%. Switching to AGNC, the preferred yields 7.4% while the common yields 15.6%. How can this relationship between preferred and common be so out of sink? For me, the obviousl solution is to sell ANH for anything else I own. Like AGNC, MTGE, WMC, IVR or TWO.

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    • yourbestfriendintheworld yourbestfriendintheworld Mar 21, 2013 8:13 PM Flag

      The preferred shares typically have a fixed coupon of 8%. But the yield on that coupon can change when the share price moves away from the benchmark price, typically $25.

      If ANH-preferred's yield is well above its coupon, it's because investors are scared of it. They may be scared of it because the company is not making enough profits to have a good yield on the common shares.

      In AGNC, investors clearly love the preferred, because they've run up the price and that's forced the yield down from the 8% coupon. Probably because the company operates well enough to keep the profits and therefore the yield on the common shares at a high level.

    • glaring_truth Mar 21, 2013 3:14 PM Flag

      The preferred -I assume you mean Series A -is trading at 26.25. The coupon yield is 8.21, HOWEVER the yield to call (4/22/13) is negative. you will lose money if it was called in 30days. (you get 30 days notice so announced tomorrow) you would have to hope the preffy is not called until 8/14/13 before you break even.
      That would be a zero yield. If called Dec 31 you would yield an annualized 4.21%

    • synchronicity does not happen between yields of the same issuer when considering preferred versus common. it has more to do with the "perceived" stability and ability to pay. common dividends can be chopped with a simple board meeting. preferred shares can also be chopped, but in many cases, they have to be paid before common divvies, and might even be cumulative.

      remember that the market is a popularity contest more than anything else.

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